To Ben Gossack, too many mutual fund and exchange-traded fund (ETF) companies sell their wares like they’re car salespeople, trying to get buyers to drive a vehicle off their lot. “6% yield! 6.5% dividends!” shout the stickers on the windshields. The sellers just cross their fingers and hope buyers don’t look too closely under the hood.

It’s easy to understand why many take this approach. Since 2008, bond yields have dropped significantly, forcing baby boomers who used to rely on fixed income payouts to fund their retirements to seek out higher-yielding equity investments. Yields fell even further during the COVID-19 pandemic, while inflation, which has increased prices on everything from food to gas, is also forcing those who want to cover their costs into even higher-yielding investments.

“If yields are half of what they were before, I need to double the size of my portfolio in order to be where I was,” says Gossack, a senior portfolio manager with TD Asset Management Inc. (TDAM), channelling the exasperation of the income-oriented investor.

A big yield might be an easy sell, but Gossack isn’t interested in creating products that will only satisfy investors in the short term. Instead, he’s developed ETFs that seek both yield and price appreciation – a combination that helps give people a better opportunity to grow their assets over the long term.

For the TD Active Global Enhanced Dividend ETF (TGED) and the TD Active U.S. Enhanced Dividend ETF (TUED), two actively managed products that launched in 2019 and 2020 respectively, TDAM looks for companies across the yield spectrum and even buys businesses that don’t pay dividends at all.

Up to 30% of these ETFs can be made up of non-dividend payers that are nonetheless outstanding businesses, Gossack says. Using a combination of option strategies, these stocks are made to produce a synthetic income stream at the same time the entire portfolio builds long-term shareholder value.

Three-layered ETFs

Gossack describes the strategy as a three-layered cake. The base is a relatively concentrated portfolio of quality equities, dividend-paying and not, which generate and grow free cash flow, have competitive advantages and avenues for expansion. Ideally, they take advantage of a multi-year secular trend such as the move to cloud computing, e-commerce, digital payments, software as a service, and health and wellness. These trends, which all factor into TUED and TGED, were identified before the funds hit the market, and, it turns out, were accelerated by the pandemic.

The next layer is a covered-call strategy, employed on all the holdings in the portfolio but especially on the growth stocks that typically contain higher implied price volatilities. The funds’ managers will write call options, which are contracts that obligate the ETF to sell the stock at a set price at expiry should the stock price rise above that set price.  In doing this, the ETF earns a premium for potentially giving up some upside. 

What differentiates TGED & TUED?  There are other dividend ETFs that use covered-call strategies, Gossack notes, but they tend to be run by an algorithm or follow a rules-based approach, which write the same number of options at the same premium every period. TDAM, on the other hand, has active managers who use fundamental analysis and take advantage of volatility to get a higher price for their option premiums or sometimes more importantly, choose not to write the call at all if the premium doesn’t warrant it.

The third layer of the cake is a put option strategy, with the TDAM team actively writing puts to generate additional income.  This strategy leverages the cash in the portfolio to further enhance the yield, with annual percentage yields in the mid-teens, Gossack says, marvelling that more funds don’t do this. “You’re getting paid to buy stocks that you like at lower prices.”  

Again, there are other ETFs out there that use put strategies, but not many use both puts and calls. That’s why TDAM opted to call them “enhanced” dividend ETFs instead of just covered-call funds, he says. “We have all these tools. Let’s use them.”

Growing income

What you end up with is an ETF that can generate a respectable yield (3.7% and 2.7% for TGED and TUED respectively as of September 30th), with the goal of having a total return that will be higher than the funds advertising 6% yields. Short as their track records are, TGED and TUED have already demonstrated significantly better total returns than a lot of their peers and benchmark indices both during the crash of March 2020 and the surprisingly fast recovery that followed.

“I believe our industry is too focused on giving investors income and forgetting about price,” Gossack notes. Though income generating ETFs such as TGED and TUED are typically targeted at older investors seeking income, he feels they could just as easily become core holdings for younger investors looking to grow their savings.

“When someone thinks about a dividend-yielding portfolio, investors think utilities, telecoms, consumer staples, banks,” he says. “These ETFs own JPMorgan, but also own Square and Amazon, which in our opinion at TDAM, appeal to a variety of age groups.”


Performance Data as of September 30, 2021


6 months


1 year

2 year

Since Inception

TD Active Global Enhanced Dividend ETF (TGED)






TD Active U.S. Enhanced Dividend ETF (TUED)






TGED Inception Date: May 3, 2019.

TUED Inception Date: May 26, 2020.